6 ms·

French tax on startups

37 points by VSerge 14y ago

riffraff 14y ago
For those who may have no idea what the author is actually talking about: http://grenouillebouillie.wordpress.com/2012/10/01/explaining-geonpi-to-non-french-entrepreneurs/ http://grenouillebouillie.wordpress.com/2012/10/01/explainin... http://www.rudebaguette.com/2012/10/01/the-pigeon-movement-frances-last-hope-for-startups/ http://www.rudebaguette.com/2012/10/01/the-pigeon-movement-f... The latter, posted/discussed previously on HN http://news.ycombinator.com/item?id=4595869 http://news.ycombinator.com/item?id=4595869
snippyhollow 14y ago
I'm tired of this BS being spread by ppl who didn't even read the finances law in question (at least bullet points). It's not true, the 60% tax rate comes from the creation of a new bracket in the income tax and the treatment of selling your startup as income. To attain 60% you 1) need to sell for more than 150k 2) count all the acquisition money as instant revenue 3) do not intend to invest. And in fact, you have decreasing income tax if you sell assets you were bound to for 2 years (5%) and increasing up to 40% (on the 45% income tax...) for 12 years and more. If you invest 80% or more of the amount you earn, you don't have this tax, the same if you sell to retire... And don't even get me started on the "auto-entrepreneur" status which is a joke (that needs to end).
- snippyhollow 14y ago
  Let's be clear: I'm not agreeing with the government's policy (at least it's now not blatantly racist): I'm not agreeing with everything in the proposed tax scheme, I'm not agreeing with the entirety of the distribution of the spending, and I'm not agreeing with their lack on direction. I'm also not agreeing on bullshit being spread by a group of clueless persons on Facebook and being spread by rudebaguette and the like for clicks. If you want to tell tall stories, good for you, it can be interesting, you'll have plenty of stories to count because the combinatorics are gigantic, but don't call yourself a journalist. /rant
  - rdbgtt 14y ago
    Thanks Gabriel Synnaeve for the great comment - it's a great example in how it's always cool to be for something, as long as you clarify that your not for it "the same way everyone else is." The "bullshit" that we spread on Rude Baguette cites sources, so if you have a problem with the way they're being talked about, that's called a "spin." We also wrote that "bullshit" about 36 hours after the creation of the #geonpi fan page, because we felt the "bullshit" was worth talking about. I don't think the blogger her, who also write for RB, is calling himself a "journalist," writing in the blog of his startup's website - at best he's expressing his opinion. PS: ending a comment with "/rant" doesn't make it any more justified - although thanks for clarifying that it was written with no forethought, afterthough, or thought at all. Yours Rudely, -Liam Boogar Editor @ The Rude Baguette
- VSerge 14y ago
  I did read the article 6 of the finances law on which my article comments. I'm unsure you have. I am sure however that you neither read my article, or any of the many explaining why this 60% top bracket is significant, ie for investors who are an essential part of the startup ecosystem, and make their money only on a few big hits with large payouts.
- yummyfajitas 14y ago
  VCs make nearly all their returns off a few big hits. So on the big hit, they will certainly: 1) make > 150k. 2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns. 3) Return the funds to investors. Sounds like this law will, in fact, cut returns by roughly 50%. Or maybe 30% if the exit takes a long time.
  - dllthomas 14y ago
    Institutional VCs will likely be able to account for the income such that they are, at least on paper, re-investing a good portion of the income.
    - yummyfajitas 14y ago
      No. A VC fund invests each dollar precisely once and then attempts (over the next 10-15 years) to return those funds to investors when they cash out. Maybe VCs in France will completely restructure their business to avoid this massive tax (presumably incurring lower returns in the process). Or maybe they will just invest outside France. Either way, this is not a small problem for them.
      - dllthomas 14y ago
        Money is fungible and people are creative; My expectation is that, in the middle-run, that they will be make this no more than a small problem for them. What are their investors doing with the money? If they intend to pile up a bunch of dollars and swim in it like Scrooge McDuck, then yes, that pile might shrink as a result of this law, but I expect that represents a relatively small fraction of institutional VC money. As the parent said, if they sell to retire, the income isn't taxed so highly; if they sell to cash out of this investment and put (at least 80% of) it into something else, then the money is being reinvested, and hopefully can be handled as such in the accounting.
  - fab13n 14y ago
andrewcooke 14y ago
so if the money is reinvested, as it presumably would be by vcs, this doesn't apply?
- VSerge 14y ago
  VCs have funds with limited timespan. They can't reinvest endlessly. And either way, an investor needs to have a decent measure of liquidity in order for said investment to be attractive, so locking it down even more than it already is would be counterproductive.
martinced 14y ago
France is destroying its future wealth and its destroying it fast. It's already one of the country with the most obstacles when you want to create a business: there are laws at basically every "level of power" and because it's one of the most socialist country of the planet (despite them always saying neo-liberal are supposedly in power) there are a great many level of powers. It's mad. Consider yourself lucky if you want to start a technology startup: it's relatively "easy" compared to, say, wanting to create a factory. Why are there no french Google, FaceBook, Oracle, IBM, Microsoft, Amazon, eBay, etc.? And the people defending these socialists are intellectually dishonest: we're assisting at the utter failure of the nanny-state (think socialist Greece and socialist Spain that skyrocketed the debt and drove the country into the wall) and yet the socialist manage (by propaganda, being basically in control of both written and televisualized press) to make believe it's all the fault of the liberals. This is sick. Just sick. Now I'm fighting teeth and nails to get my point across: if you're a french entrepreneur, do like me: leave your country. We're in a world where, thankfully, people are still free to move. So move while you can. Incorporate your startup in Luxembourg (like Skype did). Incorporate in Switzerland. Flee France. That country doesn't deserves you nor the future wealth you're going to create.
- davidw 14y ago
  Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opinions) if you're paying taxes on profits, but rather feeling like the system is full of obstacles and people who are either indifferent or actively hostile towards the idea of someone opening a business.
  - VSerge 14y ago
    Ha! On the ground in France, it's not really hostility, it's more indifference and rigidity. Some are hostile indeed, but some are helpful as well so it balances out. It's still a general pain in the backside though, and boy do they know about not communicating between services, losing papers you sent, and asking you 5 times for the same stuff... But to our problem it is the actual tax rate increase. From 30 to 60% overnight on investors' exits. Not neutral for business.
flyinglizard 14y ago
France is doing us foreigners a big favor by taking on an experience in wealth redistribution through extreme taxation. It takes some balls to do something that may destroy your economy to this extent. We should all thank the French voters who took on the risk to put this government in control. (I think it'll end in tears, but it will serve to deter the voters in other countries the next time they think of starting a class warfare against their entrepreneurs)
- btb 14y ago
  Yeah the new 75% income tax bracket in France really is putting the Laffer curve theory to the test. Will be very interesting to see how it pans out. I'm sure socialist governments elsewhere in Europe is following this grand experiment closely.
  - adrr 14y ago
    US had a 92% tax rate for a few years and 70%+ during our great economic expansion after WWII, which was highest GDP grow in our history. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
    - galactus 14y ago
      How you dare questioning the sacred idea that an income tax bracket of 70%+ would destroy the economy?
      - flyinglizard 14y ago
        What should be considered is not the maximal tax rate but the effective tax rate (after deductions, evasions and so forth). Do you have any doubt that with the paper accounting of the 50's it was significantly easier to evade paying taxes? Do you really think anyone actually paid 70%?
    - Jach 14y ago
      This number is ignoring that the tax structure of the time was quite a bit different than today. It's more enlightening to look at effective tax rates, which depending on the year were around 20-40%. (Edit: Actually very rarely far from 20%. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?DocID=456&Topic2id=20&Topic3id=22 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... shows effective personal tax rates on the 1% from 1979, and this http://www.freeby50.com/2010/08/effective-tax-rates-1934-to-2009.html http://www.freeby50.com/2010/08/effective-tax-rates-1934-to-... shows average effective taxes from before then (and after match the first link fairly closely).)
spindritf 14y ago
> Talking about what other measures the government put in place, or what tweaks the government made to lower taxes for entrepreneurs is besides the point, as NO FUNDING MEANS THERE WILL NO LONGER BE SUCCESSFUL FUNDED STARTUPS from which to exit. It doesn't matter because you cannot show a start-up that never came into existence on TV, so there is no way to hold politicians responsible for that. Nothing has changed since Frédéric Bastiat wrote "What is Seen and What is Unseen"[1]. [1] http://www.econlib.org/library/Bastiat/basEss1.html http://www.econlib.org/library/Bastiat/basEss1.html
rayiner 14y ago
This seems to affect VC's and people here are acting like you can't have startups without VC's. There are these things called banks...
- VSerge 14y ago
  At least in France, banks never invest in startups. And I mean absolutely never.
mehdim 14y ago
Instead of whining, use your valuable time to make start-ups that solves big pains, bring value to users and customers, with a good UX, which will then make $millions revenues and valuated $billions. Then your voice will have power and audience to make things change if you want so, and you'll become politician from the do-ers side. I'll even vote for you, but lot of work before... I'm a french startup entrepreneur and I approve this message. :)
sterling 14y ago
I've lived in France 12 years and run a web consultancy in Paris. The government is completely out to lunch - and I feel the international media has not covered this story sufficiently. Unemployment is going to rise, investment will drop and extreme political movements are going to become even more popular.
louisdorard 14y ago
It's worth noting that equity sales taxes don't concern French companies that have the "JEI" label, i.e. young innovative companies. There is an issue in the State's definition of "innovative", though. JEIs are companies that spend at least 15% of their resources on R&D, so we're talking about technological innovation. It seems to me that most people agree that other sorts of innovation need to be accounted — either with the same label, or a new one.

37 points by VSerge 14y ago

For those who may have no idea what the author is actually talking about: http://grenouillebouillie.wordpress.com/2012/10/01/explaining-geonpi-to-non-french-entrepreneurs/ http://grenouillebouillie.wordpress.com/2012/10/01/explainin... http://www.rudebaguette.com/2012/10/01/the-pigeon-movement-frances-last-hope-for-startups/ http://www.rudebaguette.com/2012/10/01/the-pigeon-movement-f... The latter, posted/discussed previously on HN http://news.ycombinator.com/item?id=4595869 http://news.ycombinator.com/item?id=4595869

snippyhollow 14y ago

I'm tired of this BS being spread by ppl who didn't even read the finances law in question (at least bullet points). It's not true, the 60% tax rate comes from the creation of a new bracket in the income tax and the treatment of selling your startup as income. To attain 60% you 1) need to sell for more than 150k 2) count all the acquisition money as instant revenue 3) do not intend to invest. And in fact, you have decreasing income tax if you sell assets you were bound to for 2 years (5%) and increasing up to 40% (on the 45% income tax...) for 12 years and more. If you invest 80% or more of the amount you earn, you don't have this tax, the same if you sell to retire... And don't even get me started on the "auto-entrepreneur" status which is a joke (that needs to end).

snippyhollow 14y ago
Let's be clear: I'm not agreeing with the government's policy (at least it's now not blatantly racist): I'm not agreeing with everything in the proposed tax scheme, I'm not agreeing with the entirety of the distribution of the spending, and I'm not agreeing with their lack on direction. I'm also not agreeing on bullshit being spread by a group of clueless persons on Facebook and being spread by rudebaguette and the like for clicks. If you want to tell tall stories, good for you, it can be interesting, you'll have plenty of stories to count because the combinatorics are gigantic, but don't call yourself a journalist. /rant
- rdbgtt 14y ago
  Thanks Gabriel Synnaeve for the great comment - it's a great example in how it's always cool to be for something, as long as you clarify that your not for it "the same way everyone else is." The "bullshit" that we spread on Rude Baguette cites sources, so if you have a problem with the way they're being talked about, that's called a "spin." We also wrote that "bullshit" about 36 hours after the creation of the #geonpi fan page, because we felt the "bullshit" was worth talking about. I don't think the blogger her, who also write for RB, is calling himself a "journalist," writing in the blog of his startup's website - at best he's expressing his opinion. PS: ending a comment with "/rant" doesn't make it any more justified - although thanks for clarifying that it was written with no forethought, afterthough, or thought at all. Yours Rudely, -Liam Boogar Editor @ The Rude Baguette
VSerge 14y ago
I did read the article 6 of the finances law on which my article comments. I'm unsure you have. I am sure however that you neither read my article, or any of the many explaining why this 60% top bracket is significant, ie for investors who are an essential part of the startup ecosystem, and make their money only on a few big hits with large payouts.
yummyfajitas 14y ago
VCs make nearly all their returns off a few big hits. So on the big hit, they will certainly: 1) make > 150k. 2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns. 3) Return the funds to investors. Sounds like this law will, in fact, cut returns by roughly 50%. Or maybe 30% if the exit takes a long time.
- dllthomas 14y ago
  Institutional VCs will likely be able to account for the income such that they are, at least on paper, re-investing a good portion of the income.
  - yummyfajitas 14y ago
    No. A VC fund invests each dollar precisely once and then attempts (over the next 10-15 years) to return those funds to investors when they cash out. Maybe VCs in France will completely restructure their business to avoid this massive tax (presumably incurring lower returns in the process). Or maybe they will just invest outside France. Either way, this is not a small problem for them.
    - dllthomas 14y ago
      Money is fungible and people are creative; My expectation is that, in the middle-run, that they will be make this no more than a small problem for them. What are their investors doing with the money? If they intend to pile up a bunch of dollars and swim in it like Scrooge McDuck, then yes, that pile might shrink as a result of this law, but I expect that represents a relatively small fraction of institutional VC money. As the parent said, if they sell to retire, the income isn't taxed so highly; if they sell to cash out of this investment and put (at least 80% of) it into something else, then the money is being reinvested, and hopefully can be handled as such in the accounting.
- fab13n 14y ago

andrewcooke 14y ago

so if the money is reinvested, as it presumably would be by vcs, this doesn't apply?

VSerge 14y ago
VCs have funds with limited timespan. They can't reinvest endlessly. And either way, an investor needs to have a decent measure of liquidity in order for said investment to be attractive, so locking it down even more than it already is would be counterproductive.

martinced 14y ago

France is destroying its future wealth and its destroying it fast. It's already one of the country with the most obstacles when you want to create a business: there are laws at basically every "level of power" and because it's one of the most socialist country of the planet (despite them always saying neo-liberal are supposedly in power) there are a great many level of powers. It's mad. Consider yourself lucky if you want to start a technology startup: it's relatively "easy" compared to, say, wanting to create a factory. Why are there no french Google, FaceBook, Oracle, IBM, Microsoft, Amazon, eBay, etc.? And the people defending these socialists are intellectually dishonest: we're assisting at the utter failure of the nanny-state (think socialist Greece and socialist Spain that skyrocketed the debt and drove the country into the wall) and yet the socialist manage (by propaganda, being basically in control of both written and televisualized press) to make believe it's all the fault of the liberals. This is sick. Just sick. Now I'm fighting teeth and nails to get my point across: if you're a french entrepreneur, do like me: leave your country. We're in a world where, thankfully, people are still free to move. So move while you can. Incorporate your startup in Luxembourg (like Skype did). Incorporate in Switzerland. Flee France. That country doesn't deserves you nor the future wealth you're going to create.

davidw 14y ago
Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opinions) if you're paying taxes on profits, but rather feeling like the system is full of obstacles and people who are either indifferent or actively hostile towards the idea of someone opening a business.
- VSerge 14y ago
  Ha! On the ground in France, it's not really hostility, it's more indifference and rigidity. Some are hostile indeed, but some are helpful as well so it balances out. It's still a general pain in the backside though, and boy do they know about not communicating between services, losing papers you sent, and asking you 5 times for the same stuff... But to our problem it is the actual tax rate increase. From 30 to 60% overnight on investors' exits. Not neutral for business.

flyinglizard 14y ago

France is doing us foreigners a big favor by taking on an experience in wealth redistribution through extreme taxation. It takes some balls to do something that may destroy your economy to this extent. We should all thank the French voters who took on the risk to put this government in control. (I think it'll end in tears, but it will serve to deter the voters in other countries the next time they think of starting a class warfare against their entrepreneurs)

btb 14y ago
Yeah the new 75% income tax bracket in France really is putting the Laffer curve theory to the test. Will be very interesting to see how it pans out. I'm sure socialist governments elsewhere in Europe is following this grand experiment closely.
- adrr 14y ago
  US had a 92% tax rate for a few years and 70%+ during our great economic expansion after WWII, which was highest GDP grow in our history. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
  - galactus 14y ago
    How you dare questioning the sacred idea that an income tax bracket of 70%+ would destroy the economy?
    - flyinglizard 14y ago
      What should be considered is not the maximal tax rate but the effective tax rate (after deductions, evasions and so forth). Do you have any doubt that with the paper accounting of the 50's it was significantly easier to evade paying taxes? Do you really think anyone actually paid 70%?
  - Jach 14y ago
    This number is ignoring that the tax structure of the time was quite a bit different than today. It's more enlightening to look at effective tax rates, which depending on the year were around 20-40%. (Edit: Actually very rarely far from 20%. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?DocID=456&Topic2id=20&Topic3id=22 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... shows effective personal tax rates on the 1% from 1979, and this http://www.freeby50.com/2010/08/effective-tax-rates-1934-to-2009.html http://www.freeby50.com/2010/08/effective-tax-rates-1934-to-... shows average effective taxes from before then (and after match the first link fairly closely).)

spindritf 14y ago

> Talking about what other measures the government put in place, or what tweaks the government made to lower taxes for entrepreneurs is besides the point, as NO FUNDING MEANS THERE WILL NO LONGER BE SUCCESSFUL FUNDED STARTUPS from which to exit. It doesn't matter because you cannot show a start-up that never came into existence on TV, so there is no way to hold politicians responsible for that. Nothing has changed since Frédéric Bastiat wrote "What is Seen and What is Unseen"[1]. [1] http://www.econlib.org/library/Bastiat/basEss1.html http://www.econlib.org/library/Bastiat/basEss1.html

rayiner 14y ago

This seems to affect VC's and people here are acting like you can't have startups without VC's. There are these things called banks...

VSerge 14y ago
At least in France, banks never invest in startups. And I mean absolutely never.

mehdim 14y ago

Instead of whining, use your valuable time to make start-ups that solves big pains, bring value to users and customers, with a good UX, which will then make $millions revenues and valuated $billions. Then your voice will have power and audience to make things change if you want so, and you'll become politician from the do-ers side. I'll even vote for you, but lot of work before... I'm a french startup entrepreneur and I approve this message. :)

sterling 14y ago

I've lived in France 12 years and run a web consultancy in Paris. The government is completely out to lunch - and I feel the international media has not covered this story sufficiently. Unemployment is going to rise, investment will drop and extreme political movements are going to become even more popular.

louisdorard 14y ago

It's worth noting that equity sales taxes don't concern French companies that have the "JEI" label, i.e. young innovative companies. There is an issue in the State's definition of "innovative", though. JEIs are companies that spend at least 15% of their resources on R&D, so we're talking about technological innovation. It seems to me that most people agree that other sorts of innovation need to be accounted — either with the same label, or a new one.